Julie Dickson gave a speech to the Economic Club of Canada titled The Lasting Impact of the Crisis on the Global Financial System but said nothing new.
One of the lessons of the Flash Crash was that dealer capital, which would make markets with a time horizon of a week, was being replaced with much more evanescent High Frequency Trading capital, which has an intra-day time horizon. This was strongly deprecated at the time. We may therefore look on with admiration at the latest proposals to implement the Volcker Rule:
U.S. banks would have to change the way they compensate traders involved in market-making activities under one of the proposed restrictions of the so-called Volcker rule, according to a draft circulating among regulators.
The rule, which aims to ban most proprietary trading by banks with federally insured deposits, would exempt trades related to market-making as long as the activity met at least seven standards, or principles. One principle would be that traders get paid from fees and the spread of the transactions rather than the appreciation or profit from their positions, according to a copy of the draft reviewed by Bloomberg News.
…
A forced change to pay structure “could have the effect of driving people out of the regulated industry to the unregulated industry,” said Douglas Landy, a partner at Allen & Overy LLP who once worked at the Federal Reserve Bank of New York.
The regulators could, if they so desired, seek to re-sharpen the lines between investing and trading by imposing surcharges on aged positions in the trading book. But that wouldn’t sound so tough.
It might be the right thing to do, to move longer-term market-making out of the banks and into the hedge funds. I don’t know. My problem is that I don’t think anybody else knows, either. Or cares. Except maybe Dealbreaker.
TransAlta Corporation, proud issuer of TA.PR.D, was confirmed at Pfd-3 by DBRS:
DBRS has today confirmed the ratings of TransAlta Corporation’s (TAC or the Company) Unsecured Debt/Medium-Term Notes and Preferred Shares at BBB and Pfd-3, respectively, both with Stable trends. The confirmation reflects the Company’s strong cash flow generated by its generation facilities, which are subject to legislatively mandated Alberta power purchase agreements (APPAs), longer-term power contracts on its non-regulated facilities and its diversified generation portfolio.
TAC’s credit profile and ratings are supported by its highly contracted diversified portfolio of assets. TAC currently has approximately 70% of its capacity contracted over the next seven years, with over 95% contracted for 2011 and up to 90% for 2012, in line with its stated objective of having at least 75% of its capacity under medium- and long-term contracts with creditworthy counterparties, thus reducing the Company’s cash flow volatility. DBRS remains comfortable with this strategy as it allows TAC to participate in any upside potential to improving market conditions.
…
As the Company starts to generate more cash flow from new assets placed in service in 2011 and 2012, DBRS expects that on a normal course basis, the Company’s adjusted net debt-to-capital should remain below 50% and cash flow-to-debt will remain in the 25% range, levels that DBRS considers adequate for the rating, given the largely contracted fleet. The Company had $2.0 billion in committed credit facilities as of June 30, 2011, of which $0.8 billion was available.At this time, DBRS remains comfortable with the Company’s disciplined growth strategy, financial flexibility and adequate liquidity. It is expected that TAC will maintain a low-to-moderate risk profile, underpinned by a more diversified and contracted portfolio of assets. DBRS expects the Company to continue to finance growth in line with its credit metrics.
Gold fell, capping the biggest three-session slump since 1983, and silver closed below $30 an ounce on investor sales to cover losses in other assets.
…
Gold futures for December delivery fell $45, or 2.7 percent, to settle at $1,594.80 an ounce at 1:36 p.m. on the Comex in New York, extending the three-session slide to 12 percent, the most since March 1983. Earlier, the price plunged as much as $104.80 to $1,535, the lowest for a most-active contract since July 8. The all-time high earlier this month was $1,923.70.In October 2008, gold tumbled 18 percent as the most-severe slump since the Great Depression spurred losses in global equity and commodity markets. The metal jumped 23 percent in the next two months.
Silver futures for December delivery fell 12.5 cents, or 0.4 percent, to $29.976. Earlier, the price touched $26.15, the lowest since Nov. 18. In electronic trading after the settlement, the metal topped $30. On April 25, the price reached a 31-year high of $49.845 on April 25.
On Sept. 23, CME Group Inc., the owner of the Comex, trading margins on gold futures by 21 percent and boosted the minimum cash deposit for silver by 16 percent, effective today.
The Canadian preferred share market put in a good day’s work, with PerpetualDiscounts up 10bp, FixedResets gaining 8bp and DeemedRetractibles winning 14bp. Volatility was quite good, but volume was light.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.5122 % | 2,105.8 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.5122 % | 3,167.1 |
| Floater | 3.09 % | 3.43 % | 57,604 | 18.68 | 3 | 0.5122 % | 2,273.7 |
| OpRet | 4.84 % | 3.07 % | 60,277 | 1.61 | 8 | -0.0437 % | 2,446.0 |
| SplitShare | 5.38 % | -0.45 % | 53,104 | 0.42 | 4 | 0.1763 % | 2,493.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0437 % | 2,236.7 |
| Perpetual-Premium | 5.64 % | 5.00 % | 115,273 | 1.92 | 16 | 0.0472 % | 2,117.1 |
| Perpetual-Discount | 5.32 % | 5.37 % | 111,766 | 14.83 | 14 | 0.1023 % | 2,243.2 |
| FixedReset | 5.15 % | 3.29 % | 207,540 | 2.66 | 60 | 0.0825 % | 2,322.7 |
| Deemed-Retractible | 5.07 % | 4.63 % | 236,393 | 7.78 | 46 | 0.1402 % | 2,189.2 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| GWO.PR.G | Deemed-Retractible | -1.45 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.49 Bid-YTW : 5.49 % |
| CIU.PR.A | Perpetual-Discount | -1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-26 Maturity Price : 23.35 Evaluated at bid price : 23.80 Bid-YTW : 4.85 % |
| BAM.PR.T | FixedReset | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-26 Maturity Price : 22.87 Evaluated at bid price : 24.30 Bid-YTW : 3.95 % |
| PWF.PR.M | FixedReset | 1.08 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-31 Maturity Price : 25.00 Evaluated at bid price : 27.08 Bid-YTW : 2.74 % |
| FTS.PR.F | Perpetual-Discount | 1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-26 Maturity Price : 24.36 Evaluated at bid price : 24.65 Bid-YTW : 5.00 % |
| GWO.PR.H | Deemed-Retractible | 1.46 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.60 Bid-YTW : 5.60 % |
| NA.PR.O | FixedReset | 1.70 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-15 Maturity Price : 25.00 Evaluated at bid price : 27.56 Bid-YTW : 2.50 % |
| PWF.PR.A | Floater | 1.99 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-26 Maturity Price : 20.51 Evaluated at bid price : 20.51 Bid-YTW : 2.58 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| NA.PR.N | FixedReset | 677,500 | TD crossed 677,300 at 26.00. Nice ticket! YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.02 Bid-YTW : 3.43 % |
| TD.PR.N | OpRet | 95,000 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2011-10-26 Maturity Price : 25.50 Evaluated at bid price : 25.73 Bid-YTW : 2.09 % |
| CU.PR.C | FixedReset | 69,850 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-09-26 Maturity Price : 23.23 Evaluated at bid price : 25.34 Bid-YTW : 3.65 % |
| BNS.PR.N | Deemed-Retractible | 39,653 | Nesbitt crossed 23,200 at 26.10. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-28 Maturity Price : 25.50 Evaluated at bid price : 26.05 Bid-YTW : 4.73 % |
| SLF.PR.E | Deemed-Retractible | 25,370 | TD crossed 20,000 at 21.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.38 Bid-YTW : 6.47 % |
| BMO.PR.Q | FixedReset | 24,930 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.07 Bid-YTW : 3.24 % |
| There were 21 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| GWO.PR.G | Deemed-Retractible | Quote: 24.49 – 25.00 Spot Rate : 0.5100 Average : 0.3473 YTW SCENARIO |
| IAG.PR.C | FixedReset | Quote: 26.10 – 26.90 Spot Rate : 0.8000 Average : 0.6606 YTW SCENARIO |
| BAM.PR.T | FixedReset | Quote: 24.30 – 24.60 Spot Rate : 0.3000 Average : 0.1959 YTW SCENARIO |
| BAM.PR.M | Perpetual-Discount | Quote: 22.00 – 22.40 Spot Rate : 0.4000 Average : 0.3031 YTW SCENARIO |
| CIU.PR.A | Perpetual-Discount | Quote: 23.80 – 24.15 Spot Rate : 0.3500 Average : 0.2559 YTW SCENARIO |
| RY.PR.H | Deemed-Retractible | Quote: 27.00 – 27.24 Spot Rate : 0.2400 Average : 0.1589 YTW SCENARIO |